EUR/GBP gains traction above 0.8700, eyes on Eurozone, UK PMI data

• EUR/GBP holds positive ground around 0.8720 ahead of Eurozone, UK key data.
• ECB President Christine Lagarde said the discussion about rate cuts is premature.
• BoE Governor Andrew Bailey stated that the Middle East conflict could add to the risk that inflation could go back up.
• Traders will closely monitor the Eurozone and UK PMI data on Thursday.

The EUR/GBP cross trades in positive territory for the second consecutive day during the early European session on Thursday. At press time, the cross is trading around 0.8718, gaining 0.17% for the day. Market participants await the Eurozone HCOB PMI data and UK Global S&P PMI data on Thursday. These figures could trigger the volatility of the cross.

Inflation in the Eurozone has declined more than estimated in recent months, raising market expectations that the ECB will cut the rate soon. However, ECB President Christine Lagarde said on Tuesday that the central bank has time to assess how inflation develops after a record streak of rate hikes, but victory has not yet been achieved and the discussion about rate cuts is premature.

Additionally, many ECB policymakers, including Bundesbank President Joachim Nagel and ECB Vice President Luis de Guindos, agreed that the ECB is data-dependent while mentioning that economic data would decide if more tightening is appropriate and that it's premature to discuss rate cuts.

On the British Pound (GBP) front, the Bank of England (BoE) Governor Andrew Bailey underlined that the central bank's policy on interest rates did not need to be changed. Bailey further stated that inflation was on course to get back to the central bank's 2% target, but the conflict in the Middle East had added to the risk that inflation could go back up.

Later on Thursday, market players will keep an eye on the Eurozone and German HCOB PMI data. The Eurozone Manufacturing PMI for November is expected to grow to 43.4 while the Services PMI is estimated to climb to 48.1. Furthermore, the UK S&P Global/CIPS PMI will be released. The Manufacturing and Service figures are estimated to rise to 45.0 and 49.5, respectively. These reports could give a clear direction to the EUR/GBP cross.